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CBS Revises 2008 Estimates

 CBS Corp. (NYSE:CBS) revised its 2008 outlook given the shaky conditions of the market and how advertising revenues are being affected. CBS said it expected a operating income for the full year to decline in “the mid-teens versus 2007,” when it reached more than $2.6 billion.

The company said also that it was performing an interim impairment test on existing goodwill and other intangibles. Based on the preliminary results, CBS said it expects to take a one-time, $1.4 billion impairment charge in the third quarter of this year.

CBS said it expected to post Q3 earnings of 42 to 44 cents a share, compared to analysts’ estimates of around 46 cents, and posted earnings of 51 cents a share in the same period last year. 3Q revenues are expected to be up around 3 percent over last year, led by syndie revenue and acquisitions (CNET).

Analysts response was mixed. Caris & Co.’s David Miller lowered CBS from average to below average and cut his 12-month price target from $17 to $7, according to MarketWatch. Doug Cruetz of Cowen & Co upgraded CBS from neutral to underperform, primarily because CBS has no debt payments until 2010, when $1.5 billion comes due.

Fitch left CBS alone for the same reason, leaving it at BBB with a stable outlook. The stock ratings firm said it expects CBS to end the year with $500 million in case, and another $300 million to $400 million next year, positioning it to refinance its debt.

“Fitch still believes 2009 will be a very difficult period and therefore expected cumulative 2008 - 2009 EBITDA declines for CBS could approach 25 to 30 percent through next year,” the firm said in a press release. “That being said, Fitch’s ratings and three times (3x) leverage guidance had room built in for the cyclicality of their businesses, as the company had operated below that threshold since it split-off the Viacom properties at the beginning of 2006.”

Fitch estimated that CBS’s gross unadjusted leverage would be about 2.6x at the end of this year. Further pressure in 2009 could push it toward Fitch’s 3x threshold unless something like new retrans fees offset diminished local advertising revenues.

CBS will cover release its 3Q results Oct. 30.